Qualified Transportation Fringe Benefits No Longer Deductible for Employers

In the past, employers have been able to deduct expenses related to “qualified transportation fringe benefits” (“QTFBs”) such as qualified parking, transit passes, transportation in commuter highway vehicles, or qualified bicycle commuting reimbursements. Pub. L. No. 115-97, commonly referred to as the “2017 Tax Act” or the “Tax Cuts and Jobs Act” (“TCJA”), however, has repealed the ability of employers to deduct the costs associated with QTFBs after December 31, 2017.

Ramifications for For-Profit Employers

QTFBs are no longer deductible for employers when provided under a salary reduction arrangement (“SRA”), where the employee has the choice between the actual receipt of compensation and the QTFB benefits. Employees, conversely, may still make elections under an SRA or otherwise exclude QTFBs from their income. Employees, however, can no longer exclude qualified bicycle commuting reimbursements from income for tax years 2018 through 2025.

This means that most employers have less of an incentive to provide QTFBs. Employers may provide additional compensation to employees that would be deductible so long as it is “ordinary and necessary” under Code Section 162.

Ramifications for Non-Profit Employers

Tax-exempt organizations must include as unrelated business taxable income (“UBTI”) any amounts paid by the organization for any QTFBs. This is effectively a 21% tax on these amounts. This will give rise to a requirement to file a Form 990-T for smaller non-profit organizations that otherwise would not be subject to this requirement.


Despite the disadvantages of losing a deduction (or paying a tax in the case of tax-exempt employers) many employers that previously offered QTFBs have continued their practice of providing employees with QTFBs. This is largely due to the relatively small cost, as well as local laws that require some employers to provide some form of transportation benefits.

About the Author:

Eric W. Gregory is an Associate in Dickinson Wright’s Troy office where he assists clients in all areas of employee benefits law, including qualified retirement plans, welfare plans, and non qualified compensation programs. Eric can be reached at 248-433-7669 or egregory@dickinsonwright.com and you can visit his bio here.